The wearables market is in a period of impressive and sustained growth. By 2020, global shipments of wearables are expected to double to over 220 million, with the market set to be worth $31.27 billion. There’s no denying that wearables are here to stay.
With such impressive market growth, and equally impressive potential, device manufacturers and application developers can’t afford to miss out on the wearables opportunity.
So, what is a wearable?
In basic terms, wearables are smart, connected devices are worn on the consumer’s body. As you might imagine, this encompasses a vast array of technologies. From Bluetooth headsets to smart contact lenses, the potential form factors of wearable devices are astonishing.
It’s undoubtedly smartwatches and wristbands, however, that reign supreme. These two form factors dominate the market and are set to continue to do so for the foreseeable future. Fuelled by the backing of technology giants, fashion brands and start-ups, smartwatches are predicted to rise from 41% to 52.1% of the market share by 2020, with wristbands following closely behind.
Beyond health and fitness
Health and fitness tracking has become synonymous with wearables. The current dominance of Fitbit, who’s entire stable of products focusses on fitness tracking, demonstrates the key role of this vertical in driving the adoption.
But health and fitness can only take wearables so far.
33% of consumers stop using their fitness tracking device after just six months, increasing to 50% after twelve months. This is not just a reflection on consumers’ lack of willpower! Single application wristbands may be relatively inexpensive and easy to use, but this can also make them disposable and one-dimensional. To keep consumers engaged, it’s clear that functionality needs to expand.
Payments: The killer app for wearables
Device manufacturers are therefore looking to reposition their products to achieve true mass market appeal; integrating payment functionality is central to this strategy.
An expanding and maturing contactless infrastructure, combined with an increasing number of near field communication (NFC) enabled devices and greater consumer awareness, means device manufacturers can tap into the mobile payments revolution. A recent survey revealed 54% of Europeans now regularly use a mobile device to make payments, up from 15% in 2015.
The benefits are clear. For some consumers, mobile payments don’t offer more value than a contactless card, as they both need to be removed from their pocket or bag. Wearables don’t face this issue as the device is literally on the consumer. By integrating payments into wearable devices, friction at the point of payment is removed and a truly seamless experience can be achieved.
In addition, many within the industry anticipate expansion into parallel sectors, such as mobile transport ticketing. It is clear, therefore, that payments provide a logical, compelling use-case to add value to wearable technology and drive consumer adoption.
Testing times for wearables
Whilst the business case may be clear, the path to market for these solutions can be more challenging and there are several unique obstacles to be addressed before a product launch.
Firstly, the testing framework for wearables is yet to fully mature, with the testing processes differing dramatically depending on the form factor. There are several security, physical and interoperability requirements, which creates complexity.
Many wearable vendors are new to the payments market and have limited knowledge of the various industry requirements and standards that must be met before a solution can be launched. This can have serious ramifications, as failure to comply can result in costly redesigns and delays, as well as a loss of competitive advantage, especially if issues are only identified at the formal certification stage.
Also, wearables are increasingly tempting targets for hackers as they become ever more advanced and sophisticated. Devices are no longer glorified pedometers; they are continuously connected and can hold an array of highly sensitive information ranging from payment credentials to medical records.
Hitting the high score
Payments are a huge opportunity for the wearables industry. Device manufacturers and application developers are under pressure to get ahead of the competition and bring new, innovative solutions to market quickly.
It is imperative, however, that corners are not cut in the quest for expediency. Interoperability issues, security breaches and even user injury not only lead to significant delays and costs, but also have the potential to cause irreparable damage to both an individual brand, and wearables industry as a whole.
In contrast, a well-planned and executed testing program ensures that products can be brought to market quickly, efficiently and cost-effectively. It fosters consumer confidence and promotes stability across the entire ecosystem, ensuring that wearable technology can get to the next level.
Download FIME’s eBook, “Payments: The killer app for wearables?”, to find out more.